Changes in relator’s partnership structure creates standing issues

A relator is barred from brining a qui tam action if there has been a public disclosure of both the misrepresented facts and the true facts, which combined may lead readers or listeners to infer that fraud has been committed. A district court judge determined all of the essential elements of a claim against the manufacturers of Plavix® had not been publicly disclosed and the public disclosure bar did not apply. The court did, however, dismiss the complaint for lack of standing following a change in the membership of the partnership that filed the original claim (US ex rel. JKJ Partnership 2011, LLP v. Sanofi Aventis, U.S., LLC, May 30, 2018, Wolfson, F.).

Background. Plavix is a medication used to reduce the risk of heart disease and stroke in patients who are at higher risk of these conditions. In 2011, two doctors and a Sanofi sales representative formed a partnership for the purposes of filing a qui tam complaint against the manufacturers of Plavix. The partnership claimed that the manufacturers were aware that individuals whose ethnic background was African-American or Asian-American had a much higher risk of non-response to Plavix than other ethnicities. Further, the drug had little or no effect, and was therefore medically contraindicated, for over 30% of the population.

The partnership alleged that the manufacturers made affirmative misrepresentations by systematically and deliberately promoting Plavix through false and misleading advertising that overstated efficacy, and minimized critical adverse event and risk information. The manufacturers moved to dismiss, arguing that the claims were precluded by the False Claims Act’s (FCA) (31 U.S.C. §3729 et seq) public disclosure bar, and the partnership lacked standing.

Public disclosure. The manufacturers identified four qualifying public disclosure sources, which included news articles and court proceedings. The court noted that the news articles qualified as public disclosures, however they did not disclose that the manufacturers allegedly marketed Plavix by touting that the drug was efficacious for allpatients. The question about court proceedings was complicated by timing: the span of claims cover the period both before and after section 10104 of the Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) amendment to the public disclosure bar, which stated that information disclosed between private parties in a federal case (to which the government was not a party) was no longer considered public disclosure.

The first court case established that the manufacturers were aware that a category of persons existed whose genetic variations reduced or eliminated the efficacy of Plavix. There was mention of alleged misrepresentations by the manufacturers that would give rise to an inference of fraud. The second case concerned the manufacturers alleged misrepresentation of safety of Plavix for hyper responders, including roughly 30% of the Caucasian population. There was no mention of misrepresentation of the efficacy of Plavix for hypo responders.

The manufacturers argued that the partnership relied on the same study that was relied upon in the second court case and therefore, was publicly disclosed. The court disagreed, finding that reading the shared reliance on the same study as expansively as possible, only yields that the true factual circumstance that Plavix was not effective for a substantial portion of the population based on their genetics, but no misrepresentation by the manufacturers.

First-to-file bar. Once a qui tam action has been brought on a claim, no person other than the government may intervene or bring a related action based on the facts underlying the pending action. At some point between the filing of the original complaint in 2011 and the filing of the second amended complaint in 2017, one partner left the partnership and another doctor joined the partnership. The manufacturers argue that this created a new partnership and therefore the partnership did not exist at the time of the events underlying the claims and could not be an "original source" with direct knowledge of the fraud.

The partnership opted out of the entity partnership structure when they adopted the language in their partnership agreement that the partnership "shall not be a separate legal entity distinct from its partners." The partnership therefore was an aggregate partnership, which means that the subtraction of a member dissolves the partnership and the addition of a member gives rise to a new partnership. The court found that the partnership formed a non-entity partnership as a litigation strategy to serve as a source of information concerning events which transpired before its formation on the basis of its partners’ personal knowledge. After obtaining those benefits, the partnership couldn’t then decide it wanted to be treated as an entity partnership capable of persisting in the litigation through a change in membership. Therefore, the current partnership was not a party to the original complain since it had not yet come into existence, and pursuant to the FCA’s first-to-file bar, cannot intervene in the action by being joined as a plaintiff.

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